Derivitec Ltd was born in 2011. Initially, it started life as a derivatives analytics software vendor. “Then I started to do some deep-dive market research into who in the market was successful and why. Two points clearly stood out in my mind: ease of use, and scalability,” says George Kaye, founder and CEO of Derivitec.
The firm’s central philosophy, he says, is to make it as easy as possible for people in the financial industry to provide validated risk management reporting: “That includes everyone from small hedge funds to global sell-side institutions.”
At the heart of the Derivitec model is the ability to analyse a portfolio of derivatives exclusively on the cloud, with no need for users to go through the time and ongoing costs of a system install.
“We’ve gone from derivatives analytics through to risk reporting, both pre- and post-trade. This has been helped by the development of our APIs, which plug into other vendor systems and can be used directly by clients, empowering them to do their own deep dive analysis. It has greatly widened the scope and functionality of our product.
“We provide global coverage on six asset classes – equities, fixed income, credit, commodities, FX and rates – and handle everything from regulatory reporting through to VAR, on vanilla equities through to complex derivatives,” explains Kaye.
At the end of 2016, Derivitec received new investment from a Hong Kong venture capital firm, which has also been helpful in securing Derivitec mandates from a number of Hong Kong-based hedge funds.
One example of this is the announcement made by Derivitec last August that it was collaborating with Messer Financial Software to provide straight through risk processing for PAG, one of Asia’s largest alternative investment management firms.
The solution seamlessly integrates into PAG’s existing architecture to provide a high-grade platform covering order and execution management together with a comprehensive and multi-faceted analytics framework.
The next step is to open an office there, which Kaye hopes will be in the next few months.
Stressed markets and jump events are welcomed by the Derivitec team as they provide validation that the platform does exactly what it is supposed to; namely, to support clients in actively managing risk in real-time. Brexit was a case in point.
“One of our clients, AFEX, a large global payment remittance company, said that using the Risk Portal allowed them to warn their clients ahead of Brexit of what the effects would be of a 10 per cent fall in sterling against the dollar, and the subsequent effect it would have on their margin and collateral. It was a sound test of the facilitation of our platform.
“I like to refer to it as ‘visceral risk management’; the day-in day-out monitoring of risk and margin positioning that institutions need to keep on top of,” comments Kaye.
Until last year, Derivitec was predominantly a post-trade system. It now offers pre-trade risk capabilities. This allows institutions to do bespoke analysis and back-testing before putting on trades to see what the risk impact will be on the portfolio.
“It has become much more of a front-office application, which has been an exciting evolution,” adds Kaye, who hopes 2018 will be “bigger and better”.
“We will continue to enhance the applicability and usability of our products across the industry, with a strong focus on front end development, including adaptation to mobile devices.”
On winning this year’s award, Kaye concludes: “This is a great honour, not least from the fact that the award is based on the feedback of our clients.”
